ATTENTION APPLE FANS: Samsung Blowing Past Apple To Become The Biggest Smartphone Vendor Is Not Good News

For the past couple of years, Apple fans have responded to the Android threat with an evolving series of
arguments about why Android isn't a threat:

Initially, the argument was that Android phones sucked
compared to the iPhone, which was at least a year or more ahead

Then, when Android phones improved and the gap closed, Apple
fans pointed out that that the iOS platform was was still much bigger than
Android and therefore much better for developers

Then, when Android became the smartphone market-share leader,
Apple fans pointed out that Android phones were made by several
different manufacturers and that Apple was still the biggest
smartphone maker and that the App Store was still the best
platform for developers

Yes, there were some mitigating factors. Q3 was a disappointing
quarter for Apple iPhone sales, because consumers were waiting
for the iPhone 5. Samsung's shipments were sales into
the channel, not end-user sales. Samsung's smartphone sales
include some Windows
phones. And, yes, Apple will likely have a monster Q4 on the back
of the iPhone 4S.

No matter how you look at it, in a race for global smartphone
platform domination, this is a worrisome trend for Apple.

As the history of the tech industry has demonstrated again and
again, technology platform markets tend to standardize around a
single dominant platform. Although several different platforms
can co-exist while a market is developing, eventually a clear
leader emerges. And as it does, the leader's power and "network
effects" grow, while the leverage of the smaller platforms
diminishes.

In the case of Android, this growing power will not lead to
enormous profits for Google, because, right now anyway, Google is
not selling Android. (Instead, Google is building a "moat" around
its wildly profitable search business and making it easier for
people to use Google search from their phones. This may change
when Google acquires Motorola and starts selling integrated
handsets itself.)

But the better Android phones get, and the more market share
Android gains, the more Android's network effects will increase,
and the more Apple's leverage over the iPhone ecosystem will
diminish. And that can only be bad news for Apple's ability to
continue to command exploding profits from iPhones, app
developers, musicians, media companies, and others who now must
pay it big distribution fees because they have no other choice.

Similarly, the bigger other global handset manufacturers get
relative to Apple, the less (relative) leverage Apple will have
over partners in the global parts-and-manufacturing supply
chains.

Its products are priced the same as, or below, the
competition (In the 1980s and 1990s, Apple's Macs were
always "premium" priced)

The "platform" aspect of smartphones is not as
all-powerful as the platform aspect of PCs, because so
many apps are built into all phones and/or are cloud-based or
otherwise platform agnostic, and

Android is still a fragmented platform, with several
different versions that aren't cross-compatible, reducing the
advantages of a common platform

All these advantages have helped Apple continue to thrive over
the past couple of years. But Apple's decision to move the launch
of the latest iPhone back three months, as well as its decision
not release a revolutionary new phone until next year,
have helped Android close the gap. And the ongoing Android
share gains, as well as Samsung's blowout quarter and the
disappointing Q3 iPhone sales, should be wake-up calls.